Diversification helps JGB Enterprises withstand the recession, thrive

The Post-Standard - Syracuse, NY

February 23, 2010

By: Tim Knauss / The Post-Standard

Frank Ordoñez / The Post-Standard

David Smith gathers a PVC suction hose produced at JGB Enterprises Inc.
The company has diversified its business, expanding from a specialization
in manufacturing hoses to supplying all sorts of material to the military.

Salina, NY -- For more than three decades, JGB
Enterprises Inc. has sold all kinds of hoses — gasoline hoses, snowmaking
hoses, even steel-coated, PTFE-lined hoses made for transporting corrosive
chemicals. They range in size from less than one-quarter inch to a foot in
diameter.

But the company, in Salina, has evolved since it was founded in 1977, and it
now blends commercial hose sales with a lucrative military supply business.
The result is a company that is well-armed against recession.

JGB Enterprises had sales of $70 million last year, more than double its revenues
from a decade ago, and the company expects to continue its slow but steady
growth despite the foundering economy, said Dana Thurston, material manager.

That’s because JGB has become adept at procuring supplies for the U.S. military,
and not just hoses. The company has become a busy middleman, supplying soldiers
with all sorts of stuff, as diverse as welding rod sand cappuccino makers.

“We have a lot of suppliers that we deal directly with,” Thurston said.“It’s limitless, it really is.”

JGB has established relationships over the years with hundreds of manufacturers
that make parts bought by the military — hose makers at first, but then manufacturers
of automotive parts, electronics, hardware, appliances and many other items.
JGB’s long list of vendors enables it to find parts quickly and cheaply in
response to military inquiries.

The company uses computer software to sort through the 1,000 to 4,000 requests
issued each day by the military, narrowing the list to as many as 100 that
the company might bid on, Thurston said. Then managers look through the list
and pick the contracts to go after.

JGB wins roughly 5,000 military contracts a year, according to its web site.

“It’s the purchasing expertise that we have,” Thurston said. “Our ability
to locate product timely and price-competitively gives us a good edge on
the competition.”

For an example of the variety, consider a few of the military contracts
JGB won last month:

On the production floor at JGB’s facility, at 115 Metropolitan Drive, workers
assemble fittings on all sorts of hoses, many of which will be distributed
to commercial and industrial clients in the Northeast.

But commercial hose sales represent just one-third of the business. The
rest is military sales, Thurston said.

JGB hit the jackpot Jan. 29 with a $10.4 million contract to sell the
Air Force a water distribution system that can supply an entire 1,100-person military
base. The so-called Basic Expeditionary Airfield Resources (BEAR) system
can draw water from virtually any source, purify it for drinking, pump it
throughout the base and treat sewage.

JGB procured all the parts for the system, built it, tested it and is
preparing the foot-thick assembly manual, Thurston said.

The four-year BEAR contract is expected eventually to bring in $40 million
in revenue, company officials said. JGB won a similar four-year deal in 2005
to supply BEAR systems.

JGB has 195 employees, down from about 225 at the peak of the previous
BEAR contract but up from about 130 a decade ago. Thurston said the company
will probably hire more warehouse workers later this year as work on the
BEAR system proceeds.

Wartime orders boost revenues, Thurston said, but business tends to be
good for military suppliers even during times of peace.

“You have to appreciate that after a war, the product comes back to the
United States — the jeeps, the guns, whatever it is,” Thurston said. “To
bring those things back to new, so that they can be used again, that’s
a parts supply stream that we supply.”